The Savings Rate is Zero

June 5, 2008


The U.S. Bureau of Economic Analysis released its household savings data for the first quarter of 2008.  This National Income and Product Accounts (NIPA) data represents an imperfect but widely-cited measure of U.S. Household savings. After a brief and small rebound in late 2006 and early 2007 into positive territory the U.S. Savings rate now stands at precisely zero. We are saving nothing.

If we add a savings rate of zero to our knowledge that both the housing market and the stock market experienced declines during this period we come to the inescapable conclusion that Americans are getting poorer. There are very few times in American history (The Great Depression being the most outstanding example) when we can assert with similar certainty that our wealth is decreasing. Usually something (savings, the stock market, housing prices, an appreciating dollar) is counterbalancing downward pressure on household wealth. I see none of that in the current environment. The sky is not falling — but it is certainly is dark outside.



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